While deposits decreased nationwide, Connecticut-based banks saw deposit growth in the last half of 2022, according to FDIC data.
The FDIC’s latest state banking performance summary showed that Connecticut’s 31 FDIC-insured institutions together had $87.16 billion in deposits at the end of the fourth quarter compared to $87.03 billion at the end of the third quarter and $85.64 billion on June 30. During the last six months of 2022, Connecticut-based banks saw deposits grow by 1.8 percent.
Nationwide, deposits have decreased for three straight quarters, and the fourth quarter saw a 0.7 percent decline from the third quarter.
“While this reduction slightly offsets the unprecedented growth in deposits reported during the pandemic, total deposits are still well above pre-pandemic average levels,” FDIC Chairman Martin Gruenberg said in a statement announcing the latest nationwide FDIC Quarterly Banking Profile.
The FDIC performance summary showed that Connecticut-based banks had $974 million in net income and $3.21 billion in net interest income in 2022. In 2021, the state’s banks had $1.43 billion in net income and $3.44 billion in net interest income. The 2021 amounts included results from People’s United Bank before it was acquired by Buffalo-based M&T Bank and Webster Bank before it had acquired New York-based Sterling National Bank.
Gruenberg said in the statement that the banking industry nationwide had net income below 2021 totals but still above pre-pandemic levels.
“The banking industry reported continued positive results amid persistent economic uncertainty,” Gruenberg said. “Net interest income grew, loan growth continued, and asset quality measures remained favorable despite modest deterioration.”
He added that at community banks, higher net interest income and securities gains in the fourth quarter offset increased noninterest expenses and higher provision expenses that were set aside to protect against future credit losses.
Fewer Connecticut banks reported earnings gains in 2022. About 45 percent of banks reported having earnings gains in 2022 compared to 94 percent in 2021.
While most banks are still considered profitable, 6 percent of institutions are now considered unprofitable. All Connecticut institutions were classified as profitable in 2021.
The net interest margin at Connecticut institutions was 3.49 percent at the end of 2022 compared to 2.80 percent at the end of 2021.
Connecticut institutions saw an increase in the yield on earning assets. The collective yield on earning assets was 3.88 percent at the end of 2022 compared to 2.97 percent at the end of 2021.
The returns on assets and on equity were 0.97 percent and 8.47 percent, respectively, in 2022 compared to 1.07 percent and 9.43 percent in 2021.
Total assets at the state’s institutions were $110.27 billion at the end of the fourth quarter compared to $107.88 billion at the end of the third quarter of 2022. Total loans and leases were $77.5 billion on Dec. 31 compared to $74.32 billion on Sept.30.
The number of full-time employees at these institutions increased. Connecticut institutions had 8,717 full-time equivalent employees in the fourth quarter compared to 8,549 in the third quarter.
Gruenberg in his statement said the banking industry continued to face risks from the effects of inflation, rising interest rates and geopolitical uncertainty.
“Credit quality and profitability may weaken due to these risks and may result in tighter loan underwriting, slower loan growth, higher provision expenses, and liquidity constraints,” Gruenberg said. “Additional short-term interest rate increases combined with longer asset maturities may also affect bank balance sheets in coming quarters. Unrealized losses on available-for-sale and held-to-maturity securities remained elevated at $620 billion. Higher market interest rates may also erode real estate and other asset values as well as weaken borrowers’ loan repayment ability.”
Gruenberg added that these matters would receive ongoing FDIC supervisory attention.
